It’s Possible to Buy Your First House on a Budget — Including Your Must-Haves

Considering the news often highlights soaring home prices, high-interest rates, and low inventory, it’s easy to understand why buying a home right now feels entirely out of reach for many potential first-time buyers.

There is truth to all of those claims, but it’s not all doom and gloom, and it’s not nearly as bleak as it may seem for first-time buyers…

In fact, a recent survey of first-time home buyers shows that it’s not only possible to buy a home with a limited budget, but you can even manage to find one that checks off all of the “must-haves” on your wishlist!

Let’s Define “Limited Budget”

Home prices have certainly risen over the years, and you’re probably not going to be able to buy a home for the same price buyers in a previous generation were able to, unless you’re super lucky or have a real estate agent who’s one heck of a negotiator.

But that’s the nature of real estate values — every generation struggles with higher home prices and prevailing interest rates, which often feel out of reach. Most buyers feel the pinch when they buy their first home, but you’ll be glad you bought when you did when you have a nice amount of equity built up decades from now.

So, what kind of budgets are first-timers working with right now, and what kind of homes are they able to afford? According to the survey:

• 68% had a budget of less than $500,000.
• 34% had a budget of less than $300,000.
• 17% of those with a $500,000 budget bought a condo or apartment.
• 20% of buyers with less than a $300,000 price limit purchased a condo or apartment.
• 71% of the buyers with a $500,000 budget were able to afford a single-family house.
• 69% of them with a budget of $300,000 bought a single-family home.

It’d be easy to presume that a lower budget would mean they were only able to buy something like a studio apartment or condo, but regardless of budget, the percentage of buyers who bought a condo or apartment, versus those who bought a single-family home were extremely similar. So the type of place a first-time buyer bought looks more like a matter of preference than a limitation of budget.

That said, they probably had to compromise on some things, right?!

Expect to Make Compromises…

It’s important to know what you want in a home, which is why most real estate agents advise their clients to create a list of “must-have” features when shopping for a home. But, agents also typically tell their clients that they’ll probably have to compromise on some of the things on their list.

The challenge is in knowing where to draw the line between what you want and what you can live without…

One area buyers should be willing to compromise are cosmetic issues you can easily fix or update. For example, fresh paint, upgraded light fixtures, and even flooring can all be changed with a bit of sweat equity, or a contractor, if the DIY route isn’t for you. These are the kinds of things buyers can change, take on gradually, and do so without breaking the bank.

On the flip side, there are elements of a home that are more difficult or costly to change. For example, 59% of the buyers surveyed said that a garage or parking space was a must-have feature. Building a detached garage could easily cost upwards of $7,200 (or more!), and that’s only if your property has the space (and the city or town grants approval).

And then there are things that fall somewhere in between those two ends of the spectrum, like wanting a washer/dryer or a laundry hookup, which was the top must-have for 77% of the buyers surveyed. If the home doesn’t have a washer/dryer but there’s room to install one, it might be worth the compromise. But if you have to put an addition on the home in order to do so, then it’s probably not worth overlooking, and you might want to keep searching.

…Even Though 100% of Recent Buyers Didn’t Have to Compromise!

The good news is, according to the survey, 100% of the buyers reported that they did not have to compromise on the following major deal-breakers:

• Needing significant updates
• Being located on a busy street
• Lacking natural light
• Not having laundry facilities
• No garage or parking

However, in order to achieve that, you may need to compromise on where you buy a house. Twenty-one percent of recent buyers said they ended up purchasing a home outside their initial desired neighborhood. Broadening your search parameters might open up more possibilities, and you could find your dream home in an area you weren’t originally considering.

So if you’ve been wishing you could buy a home, but thought it was out of reach, you might want to get pre-approved by a mortgage lender to find out how much you can afford. Then, speak with a real estate agent who knows the market in areas you’re interested in buying a home, and work with them to come up with a realistic wish list to find a home that meets your wants and needs.

The Takeaway:

Buying a home on a budget might feel daunting, but it’s absolutely possible! Many first-time buyers with budgets under $500,000 — even $300,000 — are finding homes that meet their needs, including single-family houses. While you may need to compromise on small, fixable things like paint or light fixtures, you won’t necessarily have to give up major must-haves like a garage or laundry hookups. In fact, 100% of recent buyers didn’t have to compromise on their big deal-breakers! Keep an open mind, especially with location, and you might find your dream home is more within reach than you think.